Strategic R&D policy under multiproduct duopoly and quality-price competition

This paper analyses strategic R&D policy in a third-country trade model where multiproduct firms with different production technologies compete in a vertically differentiated market. I show that the optimal R&D policies for both countries are subsidies when the product market is under price competition.     

Swimming upstream throughout the turmoil: Evidence on firm growth during the great recession

Economic downturns significantly impact on industry and firm dynamics. During a slowdown, increased competitive pressure makes less efficient firms more likely to exit (the cleansing hypothesis). However, evidence on Italian manufacturing firms during the Great Recession contrasts with this view. In fact, a not negligible subset of firms grew considerably during the crisis, increasing intra-industry heterogeneity. In this paper, we study these swimming upstream firms (SUFs) and we obtain two results. First, SUFs exhibit a high capability accumulation profile (innovation, intangibles investments and internationalization). Second, the impact of endogenous capability accumulation does not vanish after controlling for exogenous factors.     

Loan guarantees and credit supply

The efficiency of federal lending guarantees depends on whether guarantees increase lending supply or simply act as a subsidy to lenders. We use notches in the guarantee rate schedule for Small Business Administration (SBA) loans to estimate the elasticity of bank lending volume to loan guarantees. We show significant bunching in the loan distribution on the side of the size threshold that carries a more generous loan guarantee. The excess mass implies that increasing guarantee generosity by one percentage point of loan principal would increase per-loan lending volume by $19,000. Excess mass increases in periods with guarantee generosity, and placebo results indicate that the effect disappears when the guarantee notch is eliminated.     

Chinese international students’ psychological adaptation process in Korea: the role of tourism experience in the host country

This study aims to shed light on the effect of international students’ lifelong learning and dining experience during the trip in a host country on their psychological adaptation, place attachment, and sharing of tourism experience. Employing responses from 247 Chinese students in South Korea, a SEM (Structural Equation Modeling) technique was used for the analysis. The study found that lifelong learning positively influences dining-out flow experience, which in turn placed positive effects on psychological adaptation, place attachment, and sharing of tourism experience, whereas place attachment mediates the relationship between flow experience and both sharing of tourism experience and psychological adaptation.     

Does distance matter? Examining the distance effect on tourists’ multi-attraction travel behaviors

The purpose of this study was to examine the difference in the multi-attraction travel behavior patterns of short-haul and long-haul tourists in Incheon, South Korea. A network t-test analysis and normalized centrality analysis were employed to achieve the purpose. The finding confirmed significant differences between the multi-attraction travel patterns of short-haul and long-haul tourists. Geographic distance played an important role in determining the order of the top-ranking attractions within a multi-destssssination travel network. Since attractions with high centrality scores are comparatively more influential, they are important and competitive in attraction development and marketing. Implications for future studies were also suggested.     

Direct causal mechanisms of profit: dominant paradigm of profit seeking

This paper develops the direct causal mechanisms of profit (DCMP) to meet the conditions/requirements normatively drawn from the conceptual, logical and methodological dimensions of profit seeking, direct causal mechanisms, holistic and non-egalitarian approach, and deductive inference, which holds the proximate causal mechanism between technological change and needs evolution at the macro-foundations, and the ultimate causal mechanism between needs-focused innovation and explicit needs at the micro-foundations. From DCMP it derives propositions about matching goodness of the proximate causal mechanism and adaptive goodness of the ultimate causal mechanism, verifies them with the experiences of the winners/losers, and finally concludes that DCMP can work as the dominant paradigm of profit seeking, the determinants of firm/business success, and a powerful theoretical and practical foundation/framework for business model design and innovation, asserting that DCMP explains profit as outcome/effect in a more robust/comprehensive/persuasive manner than the existing paradigms because DCMP always guarantees the genuine causality.     

Linguistic Information Quality in Customers' Forward‐Looking Disclosures and Suppliers' Investment Decisions

This study examines whether and how linguistic information quality (measured by readability) of customer firms' management earnings forecast reports (MEFRs) affects supplier firms' investment quality (measured by investment efficiency). Our analyses reveal that supplier investment efficiency is positively associated with the average linguistic information quality of customers' prior MEFRs, and the positive association between supplier investment efficiency and customer MEFRs' numerical information quality is stronger in supplier firms with more readable customer MEFRs. Our analyses also reveal that higher linguistic information quality of customer MEFRs improves the monitoring of supplier firms by their outside stakeholders, such as institutional investors and financial analysts, and ameliorates the negative impact of suppliers' customer‐dependence on their investment efficiency. Our results suggest that greater linguistic information quality of a customer firm's forward‐looking disclosures is associated with higher‐quality investments made by its suppliers along the supply chain.     

DIVORCE LAW REFORMS AND DIVORCE RATES IN THE USA: AN INTERACTIVE FIXED‐EFFECTS APPROACH

This paper estimates the effects of unilateral divorce laws on divorce rates in the USA from a panel of state‐level divorce rates. We use the interactive fixed‐effects model to address the issue of endogeneity due to the association between cross‐state unobserved heterogeneity and divorce law reforms. We document that earlier studies in the literature do not fully control for unobserved heterogeneity and result in mixed empirical evidence on the effects of divorce law reforms. While reconciling these conflicting results, our results suggest that divorce law reforms have temporal positive effects on divorce rates, thus confirming the 2006 findings of Wolfers. Via simulation experiments, we assess the degree to which faulty inclusion or faulty exclusion of interactive fixed effects affects the policy effect estimators. Our results suggest that faulty inclusion only results in efficiency loss whereas faulty exclusion causes bias. Copyright © 2013 John Wiley & Sons, Ltd.     

How Quickly Do Firms Adjust to Optimal Levels of Tax Avoidance?

The trade‐off literature asserts that managers weigh the direct benefits of tax avoidance against the associated nontax costs. This literature implies each firm has a unique optimal level of tax avoidance that balances these costs and benefits. Our study is the first to document how quickly the average firm moves toward its optimal level of tax avoidance. We find that the typical firm converges toward its optimum at a rate that ranges from approximately 69 to 84 percent over a three‐year period, depending upon model specifications. Consistent with asymmetric levels of frictions across the tax avoidance distribution, we find the speed of adjustment is greater for firms below their optimal level of tax avoidance than for firms above. We perform additional cross‐sectional analyses to provide insight into some of the frictions that prevent firms from adjusting completely to their optimal level of tax avoidance. We generally find growth firms exhibit slower adjustment speeds and provide limited evidence that both multinational firms and income‐mobile firms exhibit faster adjustment speeds.     

TACKLING FALSE POSITIVES IN BUSINESS RESEARCH: A STATISTICAL TOOLBOX WITH APPLICATIONS

Serious concerns have been raised that false positive findings are widespread in empirical research in business disciplines. This is largely because researchers almost exclusively adopt the ‘p‐value less than 0.05’ criterion for statistical significance; and they are often not fully aware of large‐sample biases which can potentially mislead their research outcomes. This paper proposes that a statistical toolbox (rather than a single hammer) be used in empirical research, which offers researchers a range of statistical instruments, including a range of alternatives to the p‐value criterion such as the Bayesian methods, optimal significance level, sample size selection, equivalence testing and exploratory data analyses. It is found that the positive results obtained under the p‐value criterion cannot stand, when the toolbox is applied to three notable studies in finance.